Abolition of Service Charges in Restaurants (Hansard, 18 January 1994)

§ Mr. Michael Fabricant (Mid-Staffordshire)
I beg to move, That leave be given to bring in a Bill to prohibit the levying of service charges in restaurants; and for connected purposes. The Bill will amend the Consumer Protection Act 1987 and prohibit the imposition of service charges to restaurant bills.
I wonder whether you, Madam Speaker, have ever had the experience that I have had. [Laughter.] One goes into a restaurant with friends and orders the meal. Perhaps one gets good service. Perhaps one does not. The bill then arrives. It includes a hefty service charge. One proffers one's credit card, and back comes the credit card voucher for one to sign, but with the total left blank. One inquires of the waiter whether service was included in the bill, and he answers, "Yes, but we don't get to see any of it."
My Bill is designed to address that problem, which besets we British and foreign visitors alike. The Bill will not discourage good service; it will encourage it. The Bill will not stop tipping: it will encourage it, but only as a reward for good service. Tipping for good service, not tipping for bad service, seems to me, dare I say, like getting back to basics.
I am well aware that, despite the Bill having the support of the Consumers Association, the Office of Fair Trading, trading standards officers and, last but by no means least, the Restaurateurs Association of Great Britain, there may be some lawyers in this place who will oppose it. Their argument, predictably, goes rather like this. Sure, a service charge is legally binding if it mentions the charge on the menu, but once one has sat down, started to munch on a roll and butter and look at the menu, if it mentions a service charge, one can always get up and leave—oh, come on!
Then they say that, if the service is so bad and if one does not want to pay the charge, one can always hire a lawyer and argue it in court. The lawyers would say that, would they not?
The Bill would bring to an end the battle of confusion, nerve and, frankly, sharp practice that so often causes heartburn and grief at the end of an otherwise mellifluous meal. The price of a meal would be clear on the menu, just like the price tag in a shop, with no extras added on later. That is vital, not only for us, but for the millions of foreign visitors to Britain each year who feel that they are simply being ripped off.
My Bill will end all that confusion. It will protect those who have gone for pleasant meals—in otherwise reputable restaurants—which have been soured by the addition of an unexpected 10, 12.5 or even 15 per cent. service charge at the end of the bill. It would end the optional service charge, which is not optional to any but the bravest of souls prepared to dispute the level of service received. It would cease the moral strife that haunts the diner who queries the suggested gratuity and is informed that it is used to pay staff wages. In what other industry would such an important overhead as staffing costs be left to chance payments by customers?
Making it absolutely clear that the price stated on the menu is inclusive of all charges should also stamp out what can only be described as blackmail—that open credit card slip. As the informed consumer knows, there is no need to 708 leave a further tip or free will offering for staff if service is included—yet for some, and for many foreign visitors, it takes nerves of steel to argue the toss with the waiter or management.
Let there be no doubt that the service charge is the tip. If all prices were stated net, there would be no confusion. The mutual degradation of anxious waiter and befuddled diner would be ended.
I re-emphasise that I have no wish to stop free will gifts or tips but I want to end the informal pressure on people to pay a tip as an inevitable part of eating out, regardless of quality of service. I do not tip in pubs or fast food or cheap restaurants. Nor do I make a so-called free will offering to the stewardess on an airline, no matter what service she has given. Given that we do not tip in all those different circumstances, why should there be a virtual compulsion through service charges in restaurants?
The service charge is an anomaly left over from the second world war, when rationing and price controls led certain expensive restaurants to find ways around the restrictions. The law stipulates that all menu prices must be inclusive of value added tax. According to the Department of Trade and Industry code of practice on misleading price indications, any compulsory service charge should be included in the price for each item wherever practicable. In the four years or so that the code has been in existence, it has had little effect on the restaurant trade.
The House might find it hard to believe that in 1993, The Good Food Guide listed only 93 out of 1,400 restaurants that close credit cards by filling in the total, including the service charge. A survey by Which? in May 1992 showed that many restaurants made a compulsory service charge, leaving credit card slips open. Even worse, they presented credit card slips without the bill or anything else to remind the customer that service had already been included in the price of the meal.
That code of practice is simply not working, and discussions on its amendment have yet to have any impact. The code has little legal effect. Until it does, I suspect that the majority of restaurants will continue to avoid net prices on their menus, for the reason that it makes their prices appear cheaper and more competitive than other restaurants, which is most unfair.
A ban on additional service charges is supported not only by the many consumer organisations that I mentioned earlier but, I suspect, by my right hon. and learned Friend the Chancellor. I refer not to his dining habits but to the tax man, who should benefit from net prices and the removal of the supposedly optional charge that allows the restaurant to avoid VAT on that element.
As my colleagues know, I am not a regulator by nature —far from it—but tighter guidance is needed to ensure that the intentions behind the Consumer Protection Act 1987 stick. You will find this impossible to believe, Madam Speaker, but even the French have legislated to make all-inclusive restaurant prices obligatory. Now, every European Union member state except Britain and Greece has all-inclusive prices.
Recently, The Good Food Guide commented: The recession may have forced proprietors to reduce their headline prices to persuade customers through their doors, but some of them load the other costs to the point of virtual deceit. The public sometimes feels restaurants are combat zones. My Bill will go some way towards ending that.
I realise that, in presenting this Bill, I face the gravest danger. Hon. Members on both sides of the House have
709 drawn my attention to the risk of ground glass or worse. The Bill, however, has cross-party support, and it needs to be passed, for the sake of both equity and our tourist industry. I commend it to the House.

§ Mr. Andrew Mackinlay (Thurrock)
I do not think that we should pass the Bill. Notwithstanding its- superficial attraction, it should be seen against the backdrop of the current wage position: at present, we have no national minimum wage. It ill behoves the hon. Member for Mid-Staffordshire (Mr. Fabricant) to bleat on about people who can pay for their meals with credit cards. Many people who work in restaurants are, unhappily, dependent on tips to obtain their wages.

§ Dr. John Reid (Motherwell, North)
They are not getting them.

§ Mr. Mackinlay
No, they are not. Not only is there no minimum wage; such people have no access to industrial tribunals, and thus cannot complain about the unreasonable behaviour of their employers.
The hon. Member for Mid-Staffordshire mentioned the practice in France. In France, there is a basic minimum for people working in restaurants, and they are able to complain about unreasonable behaviour on the part of employers.
If the House passes the Bill, it will give satisfaction to those who can purchase meals with credit cards, but it will do nothing to improve the lot of restaurant workers receiving low wages, who often have no national insurance or pension rights, and are paid skivvy wages.
The House should concentrate on introducing employment protection, especially for people on low wages. We should ensure that such people have a right, and remedy, to complain about employers who withhold money to which they are entitled. The House should take such action, rather than placating people with bits of plastic in their wallets who can afford to pay more.